Monday, April 16, 2012

The Rollout of Facebook Offers

1. Facebook Offers represents an interesting initiative: a new possible revenue stream, but at what cost? Offers is aimed squarely at pleasing investors: it doesn’t really make the world “more open and connected,” which is Facebook’s mission. The problem is that Facebook’s current revenue stream isn’t yet on auto-pilot, wringing every cent out of every ad opportunity, the way Google does, so Offers risks diluting the company’s focus.

2. Google generates 96% of its revenue from ads. Sure, it’s tried to diversify with Google Apps, Google Checkout, Android, and other offerings, but as long the AdWords and AdSense cash cows continue to bear fruit, Mountain View remains on solid footing. Ideally, investors would like to see another revenue stream—Microsoft, for example, has both Windows and Office—but Google never rests. Its biggest efforts—Android, Chrome, YouTube, and Google+—are directed at making the web safe for ads. The bottom line: while overwhelming dependence on a single source of revenue does not a healthy P&L statement make, Google makes it work, wringing every cent out of every ad.

The same can be true of Facebook, whose ad system is younger and even more promising than Google’s. Again, diversification is always good, but sometimes it can lead to distractions, especially when Facebook’s head count is relatively so small (a fraction of Google’s). As Google has shown, Wall Street is more impressed by quarterly earnings than by experimentation.

3. Mark Zuckerberg’s utter control of the company he founded means that he’ll continue to push the social network in ways he thinks are best. That the company will soon have shareholders is unlikely to shrink his vision for Facebook and his appetite for ceaseless tinkering. He won’t spread himself as thin as others—Yahoo and Amazon, for example—but he’ll continue to practice the Hacker Way, which is predicated on disruption.